Shale Revolution Spreads With Record Wells Outside U.S.: Energy

Nov. 15 (Bloomberg) -- The hydraulic fracturing of shale in
search of oil and gas has hardly started outside the U.S., but
that’s changing.

A record 400 shale wells may be drilled beyond U.S. borders
in 2014, with most in China and Russia, according to energy
consultants Wood Mackenzie Ltd. While that’s a fraction of the
thousands of shale wells drilled in the U.S., the number of rigs
used onshore in Europe and the Asia-Pacific region has increased
10 percent over the past year, data compiled by oil services
company Baker Hughes Inc. show. Most of those rigs are meant for
shale, Bloomberg Businessweek reports in its Nov. 18 issue.

“It’s likely there will be a revolution,” Maria van der
Hoeven, executive director at the Paris-based International
Energy Agency, said in an interview in London. “But not
everywhere at the same time. And you just can’t copy the U.S.
experience.”

Fracking in the U.K. will start next year, after the
government lifted an 18-month moratorium imposed when a drilling
company found it had accidentally caused earthquakes. Two
utilities -- Centrica Plc of Britain and GDF Suez SA of France -
- have bought stakes in the country’s drilling licenses to help
bankroll the drillers and win a cut of any profit.

“History repeats itself, yes, but nothing is ever the
same,” said Christof Ruehl, chief economist at BP Plc in
London. “There’s going to be developments outside the U.S. and
North America which will be big and important, no doubt. But it
will take some time.”

Shale Boom

The shale boom has moved the U.S. closer to energy
independence, added jobs, helped revive manufacturing, and
lowered gas bills. Yet the conditions that fostered the U.S.’s
success don’t exist in Europe and Asia. In some countries
landowners don’t own the oil and gas in the ground: the state
retains all mineral rights. Or a country may levy much heavier
taxes than the U.S. on oil and gas profits.

Once they start fracking, though, countries such as China,
Argentina, and Russia could experience new oil and gas booms.

China has the largest shale gas reserves, estimated at
1,115 trillion cubic feet, followed by Argentina at 802 trillion
cubic feet. In shale oil, Russia tops the list with about 75
billion barrels, according to a report by the U.S. Energy
Information Administration. Australia, Poland, and Algeria all
have big potential.

Argentina may be the first to capitalize on its shale
resources with production expected as early as 2015, according
to research by BCG, the Boston Consulting Group.

Oil Players

Fracking outside the U.S. is likely to be good for the big
oil players. Royal Dutch Shell Plc teamed up with China National
Petroleum Corp. this year to explore in Sichuan, the province
that accounts for 40 percent of China’s shale reserves. Hess
Corp. is exploring with CNPC in the western Xinjiang region. YPF
SA, the Argentine oil company, has joined with Chevron Corp. and
Dow Chemical Co. to tap deposits in the south American country’s
vast Vaca Muerta formation.

“Within three to five years, there should be exponential
growth in drilling as there was in the U.S.,” Edward Morse,
head of commodities research at Citigroup Inc., said in an
interview. “The big problem isn’t replicating the geology, it’s
replicating the critical ingredients that got the American shale
revolution going.”